Sell or Hold 1 year old Rental for 50k profit?

[Tyler Steinke]

Hi Bigger Pockets Investors,

My wife and I purchased a rental property in Bend, Oregon 1.5 years ago for $480k and put another 30k into rehabbing it. Our current tenants are moving out soon after 1.5 years. My question is “Should we throw it on the market and net around $50k in profit or hold?” If we put the home on the market we would lose at least a month rent and utility cost.

Some background on the property is that we put 120k towards a down payment at 6.125%. Mortgage plus PITI is $2500 and rent is $2600. The home is turn key with a new roof, furnace, floors, AC unit and paint inside and out within the past few years. The unit is in an "A" location but we don't love the layout and it is on a very small lot with a minimal yard and one car garage. We have a lot of money tied up in the unit and would like to find a rental unit the we would consider living in at some point with a house hack option/ADU and or a home that has a better long term appreciation potential. We really are breaking even as far as cash flow is concerned but would also be in a fine financial situation if we rented it back out and would just lose a month of rent.

My wife and I both work W2 jobs and manage our rental properties ourselves. We currently have three other rental properties and rent a studio out in our primary residence. Any advice would be appreciated.

Thanks, Tyler & Rachel

[Randall Alan]

@Tyler Steinke

I'm having a real hard time getting past the $100 / month profit on a $510,000 investment! And if that is just with PITI, you are likely losing money after maintenance & Capex. Was this an appreciation play?

I would say sell - every day of the week from a cash-flow perspective.  That same money sitting in a high yield  savings account would be earning you $7,500/year at 5% on $150,000.  

You could deploy that money elsewhere and buy a few  smaller (or at least less expensive) homes in a friendlier market and come out way ahead unless you are content with just waiting for the market to appreciate.   I’m a cash-flow guy - as real estate is our full time job - so no cash  flow equals “sell” in my book. 

All the best!

Randy 

[Tyler Steinke]

Thanks for your reply Randy. This was an appreciation play with hopefully a cash out refi in the future but who knows when that will happen. This was also our first remodel and a good learning experience. We are leaning towards testing the waters for putting it on the market even though originally it was going to be a long term buy and hold. We are in an expensive market here in Bend, Oregon so its tough to cash flow at all with these higher rates.

[Chris Watkins]

Hey Tyler,

As you know, cash flow is dwarfed by appreciation in Bend. If you're looking to buy again in the area, that's a wash when comparing properties. Transaction costs of selling, then buying will mean a hit to the equity that you have, plus a likely tax hit. The only way I would see it benefiting you to sell would be if you can step up your equity again with another value-add property to force appreciation or leveraging a more valuable property. It really depends on what you want your portfolio to look like, and whether this is an easy renter that will continue to increase in profit as the years go on.

Chris

[Theresa Harris]

You mention you don't like the layout and that was important as you might move into the rental, but where are the 3 other rentals?  If they are also in Bend and you do decide to move into one of the rentals-would any of the three other rentals be a contender?

If you have no immediate plans to move into it, I'd rent it.